from the two-for-the-price-of-two! dept

Reed Hastings is very sad. I know, because today I got a very somber email from the Netflix Co-Founder and CEO (also posted here). He's sad about the very negative reaction of Netflix subscribers to the recent fee increase. He's also sad about something called "Qwikster" and red envelopes.

I was going to write up a post analyzing the causes of Mr. Hastings' sadness and how he plans to make things right, but then I saw this:

Exactly.

Frankly, I really don't understand the point of this apology letter. If you're not going to do anything to address the real cause of your (former) subscribers' dissatisfaction, why even bother bringing more attention to the issue? Seems like when you say you're trying to "make things right," it might be a good idea to actually try to make things right, not worse.

Re: Re: Re: Re: Re: Understand the frustration, but...

Re: Re: Understand the frustration, but...

Netflix stated that the price increase was in no way related to increases in costs on the supply side. They stated that they were increasing prices to make more money and felt the price was still a good value, which it was, honestly. Splitting the company is their fault. The stockholders don't like it and the consumers don't like it. It's a bad move all around and needs to be rectified.

Re: Understand the frustration, but...

I don't blame Netflix for the price increase, but splitting the company is kind of stupid. As Mike has stated when talking about relying on the Apple app store, when you build your company on someone else's platform, you run a huge risk. In this case, depending on the movie studio's not to screw you with unsustainable licensing will be Netflix's downfall.

Re: Understand the frustration, but...

Scooters wrote - "... I'm siding with Netflix on this one (even if I don't agree with the split). This change is not of their doing.

With all the years TD has been writing about the ills of Hollywood, how in the world could anyone sit and blame Netflix for these issues?"

I completely understand that the greedy media companies are responsible for this, but Netflix is at fault too. I understand that they are trying to get more streaming content, but raising the prices on the customers is the wrong way to do it. If you have a business idea you propose it to investors. If they think it is worth while they will invest in it and help you get going. You DO NOT charge the customers in the hopes you can provide a potential product in the future. That is what Netflix streaming service is right now. Potential. It is the way to go, and I prefer it over physical media, but until they can provide decent content it is merely just a bonus to an existing service, the DVD rental and not a separate service.

Re: Re: Understand the frustration, but...

The thing is, it seems to me they're betting on the wrong horse, at least for now, and by the time their horse does catch up, it may be too late for them.

They seem to be invested in the idea that DVDs are a passing fad and streaming is where it's at. But everyone I know pretty much prefers the DVDs, If for no other reason than the number of titles available for streaming is so ridiculously limited. Also, a lot of people still don't have their TVs connected to the Internet, and/or don't have a connection that's fast or reliable enough to make streaming worthwhile.

The problem with the limited streaming catalog isn't going to go away any time soon, either. That's something completely out of Netflix's control. It's a function of all the ridiculous copyright bullshit the studios are engaged in and seem absolutely unwilling to abandon, even when it's clearly shown to them how they can make as much, if not more, money by doing things differently.

Maybe eventually DVDs will fade away but that's a long time away, and in the meantime, Netflix is just driving their current DVD customers away in droves to Blockbuster and Redbox by treating them so shittily. I tried to log onto Netflix last night using my iPad app to add a movie to my queue, only to get a message: "Sorry, but the Netflix app is limited only to users who choose our streaming service. Please go to our web site and log on to upgrade your account."

I got the Netflix email and am just as confused

I love the part where they ask if Netflix thought we were mad that they were not split into enough parts. This has to be the weirdest move, next to New Coke, I have seen a company make. Why dilute their brand name?

Re: I got the Netflix email and am just as confused

my guess (and it is just that) is that when they started negotiating with the studios on streaming services the dvd service started getting dragged in. now imagine trying to negotiate for the new thing and suddenly the old thing that you have been doing successfully for so long is dragged back on the table. "studio exec: oh, by the way, if you want this streaming deal to work out you will also need to start paying us more for all those dvd's you've been sending out." that golden goose starts to look a little pale and sickly.

Losing More customers

Lets see they,
- Jack up prices
- Take things that are convienent and make them difficult to use for no reason at all.
- Make up BS excuses about why they did it
- Don't Seem to care about their customers

Re: Losing More customers

Use the local Videostore in your town again if it even exists still.
Support your local Economy.Help your fellow local folks out first.
Why do you keep on going to strangers who are not people but Servers taking away people's jobs in your own town you live in.

Re: Re: Losing More customers

Use the local Videostore in your town again if it even exists still.
Support your local Economy.Help your fellow local folks out first.
Why do you keep on going to strangers who are not people but Servers taking away people's jobs in your own town you live in.

Thank you for reminding me of this Mr. Hollywood exec, You have hypnotized me. "Yes I will go back to the old ways of doing things. I will drive all over town paying high gas prices and risk getting into an accident in the parking lot. I will go to the video store of limited selection and late fees. I no longer want to order things from the comfort of my own home.
I will instead stand in line and enjoy filling out that membership form again, because I haven't rented a movie in two months. This time I will love paying $5 for new releases as opposed to a flat rate for unlimited movies. I will revel in the joy of realizing that all the copies of the movie I wanted are out for the night and so I'm stuck watching some scratched up old copy of date movie. I will enjoy having local high school students who work behind the counter recommend Porky's five to me. I will enjoy the embarrassment of the local folks having access to the database of everything I've rented for the last six months.
I will enjoy finding out that the movie I want to watch is not available in state of the art format(because those are all rented) so I'm stuck watching it on the best technology that 1995 had to offer.

I will enjoy going back and renting the same disc again and again because the disc is a TV series and I can't watch the whole thing in one night.

Finally I will enjoy taking the video back to the wrong store. Oh whoa unto you progress! Go back to the evil that has spawned thee!

Precisely; this used to be the closest thing to delivery on terms I was acceptable with and which would work with the increasingly metered and crappy internet in the under-infrastructure invested suburbs I'm stuck in for a time.

In all likelihood I'll probably end up canceling the 'netflix' part of the account if it doesn't have a REALLY low price. I value that service at far less than what the old media idiots are willing to sell at.

ok, so this is 'someone read on the internet' happy hour discussion yesterday, but here goes.

first off, yes this sucks for customers. but, i think it is also good.

we've heard more than once (here on TD in fact) how the movie studios are using the DVD side against the streaming side, or the streaming side against the DVD to force Netflix into certain concessions.

by splitting the company, they remove that leverage the studios have over the streaming.

in theory (a hypothosis, for you scientific types), this will make the offerings of both better, at the cost of convience since there are two instead of one.

Re:

idk man, good theory and all but here is how I see it:
A. they use it as an opportunity to charge way more, two companies after all;
B. it doesn't make any difference at all because it shares a common parent company which only results in making it more difficult;
C. all of the above.

PLEASE

First as all companies as soon as you get big enough you go brain dead. Will not even get into their android app that does not work but when you state "Most companies that are great at something" and use a company that is BK you sort of lose your ability to be taken seriously in the first place

If the studios caused the price increase, that I understand. To separate into two companies to prevent further leverage by the studios, that I understand. What I don't understand is why the streaming half has changed to those stupid horizontally scrolling menus with no ratings and no titles. EVERYONE hates it! Explain that stupidity away.

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Good to see some pro netflix comments for once, i should have expected it here. Personally, i couldn't care less about the dvd offerings to begin with, dvd's are dying media, rapidly approaching becoming obsolete. (yay)
It seems to me netflix recognized this and decided to cut off the limb early to minimize damage and maximize the money they can pour into new streaming content, which is the market they always planned on being in to begin with.

DVD wasn't dying off on it's own fast enough, so they kicked it off the bridge. Hell if it's not in the streaming library that's easy enough to fix. fire up the vpn and hit demonoid.

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Completely agree... and with the mail service threatening to move to 3 days per week they will definitely have trouble. Might as well make the tough decision and split the business so they are less exposed later. This way if they have to close down quikster or declare bankruptcy on that side of the business it won't affect their main focus on streaming.

Re:

I agree with you. I still keep my old original Xbox in the closet just in case I have to play a DVD, but honestly, compared to the streaming offering from Netflix, DVD's are a pain in the ass. I'd rather torrent something and copy it to a flash drive to plug into my Roku so I can watch it on my TV than dig out the DVD player...and I don't usually torrent things. I never even had the DVD offering from Netflix, so this whole change doesn't effect me. I can understand a bit of anger at the price hike, but let's be real here: Comcast offers a $99 one year deal when you sign up, and after that year it shoots up to almost or over double that, depending on what options you have. The fact that you got both streaming and DVD's from Netflix for as long as you did should buy them a bit of leeway...especially since we ALL KNOW the more successful they got, the more they'd be "taxed" by hollywood...

I think Netflix is doing the right thing, split out the streaming from DVD service. Let the DVD service keep itself alive as long as it can, but they know it's going to die. It's a good business move.

However this letter from Reed Hastings was the dumbest part of the split. He thinks people are mad about the price increase because it wasn't communicated to them. It was covered in every form of media for a few weeks. Writing a letter a few weeks too late and confirming that you're jacking up prices isn't going to make fans happier. People are pissed over a 60% price hike, not the fact that the CEO didn't write me an e-mail.

Re: oatmeal

Netflix, from the beginning, intended to be stgreaming only. Couldn't do that when they started, broadband wasn't as ubiquitous as it is today, and people hadn't caught on to video over the web. Now netflix gets to where they want to be, streaming only. I'm down with it. Price split was expected by me. I knew they would eventually offer streaming by itsellf and they weren't going to give it away for free (by itself).

I love netflix. I love the streaming selection. (I dislike the lack of subtitles on anime but I can get those on funimation) I don't think I will be any worse off except for the integration of the queues (seeing what's available on streaming from your dvd queue). I still have a dvd I haven't watched since august.

I'm not going to complain. I'm still getting value I wouldn't get elsewhere. I don't want to waste my time torrenting episodes of tv shows that are on netflix when I want to watch something. Add that there are no commercials and you've got a bargain.

I always thought "netflix" was a weird name for a dvd by mail company.

Keeps the books seperate...

Think about it this way, Stars wanted a crap-ton of money because they see how much Netflix is making. If they split DVDs off from streaming, they get to say "this is how much streaming makes" and can make a stronger case for lower prices.

I think this was the purpose for splitting the pricing to begin with. Splitting the company is just the next logical step towards autonomy.

Customers leaving in droves?

Yeah, that email was pretty awesome. I hadn't cancelled my Netflix account up until that point - still mulling it over. Once I got the email that did absolutely nothing to "make it right," I figured it was as good a time to cancel as any. I hope lots of others did the same.

Re: Customers leaving in droves?

Re: Re: Customers leaving in droves?

It's not the price raise alone, it's now separating the DvD/Streaming to 2 separate businesses.

Now if I want to watch a movie, I need to search two sites, and I have to maintain two queues... and if an Item on my DvD queue becomes available to stream, it isn't automatically be put on my streaming queue (most items on my queue get there that way).

First Netflix raises the price, then the make it inconvenient to use their service. What's the next move? Require you to add postage on mailing DVD's back? Maybe charge you a cleaning charge on every DVD you rent, or charge you for damaged-in-the-mail DVDs...

"Huge price increase"

My mother pays $15 a month for basic cable, the kinda that doesn't even have USA or Lifetime (her favorite channels).

I convinced her to trade that $15/month fee for Netflix instead. Despite their "huge price increase", Netflix is still an insane value compared to cable. She can now watch pretty much any of her favorite shows, any time she wants, pretty much anywhere, and without commercials.

I say that despite this "huge price increase", Netflix's service is still highly undervalued. So to all those who feel that Netflix is screwing them, I say...go ahead, keep the inferior service that is cable TV. Pay more for less. And the cable company will hike the rates and fees (again, and again, and again), so you can rest assured that Netflix will always have superior value.

My next job is to convince my dad to drop his $100+/month HD cable bill in exchange for Netflix.

Brick and Mortar

Took a step back to a brick and mortar store for videos at the new Family Video store that opened down the street. Going there made me realize just how much I missed the video store experience, while simultaneously reminding me just how much selection Netflix has in comparison. Each has their strengths, but for a guy who only gets through 2 or 3 movies a month, Netflix just isn't worth it anymore. I do still have the streaming, mostly for the kids.

The video store had a huge marquee in the window that said, "Welcome, former Netflix subscribers!" The clerk said they had seen a big increase in business over the last couple months. Goes to show that convenience alone is not enough. That convenience has to come at a price that makes it worth it to the customer.

rate movies twice???

It is unbelievable to me that in his note he acts like having to go to 2 separate websites and rate each movie 2 times is somehow an advantage over the current system. Part of what makes netflix good is that it is quick and easy to use, the new method guarantees it will take twice as long to rate a movie.

Twisted thinking

When I first heard about the "apology" letter I had hopes that they got the message from all the consumer backlash. That was short lived after reading the actual letter. Thanks Mike for posting the link. While Hastings seems to get the point that they did something wrong, He still doesnt comprehend what they actually did that everyone is complaining about.

!!!ITS THE PRICING STUPID!!!

No one really cares that you didnt tell them about the price hike BEFORE you did it. They care that you HIKED THE PRICES.

This "apology" letter just shows his continued ignorance and wont fix this. Using this as an opportunity to announce more anti-customer actions is just insulting. Splitting the company in two might be good for the company (or future companies), but its not good for the customer. Customers want convenience and low prices. Failure to recognize this will result in the failure of both companies, divisions ,subsidiaries, whatever.

The price increasing may be due to the studios, but the latest move is all theirs. Not inter-linking accounts and/or websites is only going to result in even more backlash.

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"So what? This is its prerogative. Don't like it? Take your business elsewhere."

And thats the decision that the customers (and investors) are making. If it was no big deal to Hastings, as implied by your "so what?" comment, then he wouldn't be making this pathetic "apology" to the remaining customers. I would hope that your not as clueless as you seem by implying that you dont need customers in order to have a business.

Apology

It's still a pretty good deal for a lot of people

Honestly, for the price of a mediocre steak sandwich and a pint of beer you can get both sides of Netflix. If it's true that they're adding games, it's still the best entertainment value I have access to (short of a library card), even if it does cost twice as much as last year. You can barely play a computer game for less than $15 a month anymore. My wife and I watch a lot of movies, and if the Better-Half wasn't addicted to the Vampire Bill Show, we would probably cancel cable before Netflix.

I understand being upset at the price hike, as well as the way it was handled, but the level of anger seems disproportionate to the level of insult. Especially because it's not entirely Netfix's fault. If my Netflix subscription keeps me and the wife away from the movie theater or the bar even just once a month, it has more than paid for itself. I'm not trying to sound like a fanboy, it's just that based on the way the internet's collective head has exploded over this, I feel like Netflix deserves at least a little bit of understanding. It bottles the mind that someone would complain about Netflix "abusing" their customers, and then say they're going back to Blockbuster.

Also, I'm not sure I understand all of the plastic disc hating going on. Streaming is great, sure, but if you have even a halfway decent home theater setup, then you know that the quality you can get from a disc is far superior to even the rare "HD" stream from Netflix. The disc selection is superior to the streaming options and the quality of playback, particularly for blu-ray, is superior as well (at least in my experience). I always considered the streaming to be a good bonus, but not a substitute, even if it is responsible for me sometimes sitting on a single disc for a month.

*pulls out the tinfoil and makes an admirals hat*
It is a secret plot to save the USPS.
The new company will have to negotiate a new fee structure with the USPS that will generate enough revenue to keep them going. The excess will be siphoned off by congress, and moved through a series of pet projects until it is delivered to Hollywood in a truck. They will drive several decoy trucks to avoid detection, but the main truck with the money will pull into a parking structure and head to the secret subbasement, behind the fake wall, and back up and dump the contents into the giant pool of money that the Hollywood gatekeepers enjoy playing Scrooge McDuck in.

Its a business, its putting itself out of business. Its getting help from the media companies who enjoy the ability to claim its pirates killing their business model and not their total disregard for consumer demand. Someday they will die off and hopefully we will have better replacements... but I doubt it.

If netflix was serous about streaming and keeping prices low they would have used some of their profits to buy themselves some lot space a director and some cast (were in a depression they could have gotten a bargain) if for nothing else than to have a bargaining chip with hollywood. at the most they could have had exclusive content that they could have licensed and used to get a seat at the big boys table, now they are licking hollywood's scraps and begging for more.